April 12, 2006

Greater Oversight Of LIPA?

In light of rising electric bills and uncertainty about the future of the management deal between the Long Island Power Authority and KeySpan Corp., State Assemblymen Fred Thiele (R., Sag Harbor) and Marc Alessi (D., Manor Park) are working on a number of bills aimed at making LIPA's operations and billing practices subject to more rigorous public supervision.

In September of 2005 the average electric bill rose more than $50, to approximately $157, after LIPA introduced a Fuel and Purchased Power Cost Adjustment in an effort to offset rising fuel costs

after Hurricane Katrina. LIPA, which relies on fossil fuels to power most of

the electric grid that serves 274,800 people in Eastern Suffolk, did not seek permission for the surcharge from the state's regulatory Public Service Commission.

Alessi is co-sponsoring a bill that would require LIPA to seek approval for any rate increase from the PSC, which oversees increases in the base rate. "I believe that the temporary surcharges were backdoor rate increases," he said.

"I'm not totally unsympathetic to the plight LIPA is in," Thiele added, but said that LIPA should be "forced to justify" increases in the electric bill to the public and demonstrate that purchasing decisions are being made with the consumer in mind.

In late March, LIPA announced that it would change its billing statement presentation, making, in effect, the fuel surcharge a permanent feature of the bill. The new bill will be broken into two parts: the cost of electricity delivery, and the cost of electric supply, based on the price of oil and natural gas. LIPA instituted a two-year rate freeze in January, barring any unforeseen events, such as Hurricane Katrina, that could drive up the price of oil.

"There is a dissatisfaction that bills are high and LIPA understands that," said Michael Lowndes, LIPA's spokesman. But, he added, "Folks don't appreciate how much we have to spend to keep the lights on on Long Island."

Thiele and Alessi are both sponsors of a bill that would make the Board of Trustees that manages LIPA an elected body. If the board "is only accountable to the politicians in Albany that appointed them, the public doesn't do quite as well," Thiele said.

Richard Kessel, the chairman of LIPA, is "fully supportive" of the creation of an elected Board of Trustees, Lowndes said, noting that such decisions are up to the state legislature.

Both Alessi and Thiele expressed a desire for greater oversight of LIPA's business practices. Alessi is co-sponsoring a bill that would create a Long Island Utility Oversight Panel, that would seek to "improve the energy planning . . . and to provide greater oversight over LIPA`s operations and actions."

Thiele proposes creating a Community Advisory and Oversight Committee as a public forum to discuss pressing issues facing LIPA. "I think decisions about Long Island's energy future should be made by Long Islanders," he said.

The fate of the Management Services Agreement signed by LIPA and KeySpan in December of last year remains uncertain. The accord, which extended KeySpan's management of LIPA's electric grid until 2013, is now in limbo after the British company National Grid, LLC, made a $7.3 billion bid for KeySpan. The MSA allows LIPA to terminate or renegotiate its contract in the event of a change of ownership of KeySpan, but Lowndes said that a review has been put on

hold while LIPA awaits the outcome of the proposed buyout. "The shareholders are going to make out pretty well," Thiele said of the deal. "I want to make

sure the taxpayers get some benefits as well."

Alessi added that the possible renegotiation of the MSA was the "last chance to try and hold [LIPA] more accountable" to the public.

While LIPA has scored high marks from the state PSC with regard to

reliability and service, high electric

bills have placed the company at the bottom of J.D. Power and Associates' annual rankings of customer satisfaction. In the 2005 Residential Customer Satisfaction survey of the 78 largest

utilities, LIPA was tied for last place,

with a score of 85. The average score was 99.

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